Venezuela’s post-Chavez future — and Cuba’s

With Hugo Chavez nearing expiration, the New York Times presents a forum on the future of Venezuela. Richard Fernandez summarizes some of the more intelligent contributions to that forum and adds his throughts.

The future of Venezuela isn’t bright. Moses Naim of the Carnegie Endowment for Peace writes:

President Chávez has bequeathed the nation an economic crisis of historic proportions. The crisis includes a fiscal deficit approaching 20 percent of the economy (in the cliff-panicking United States it is 7 percent), a black market where a U.S. dollar costs four times more than the government-determined exchange rate, one of the world’s highest inflation rates, a swollen number of public sector jobs, debt 10 times larger than it was in 2003, a fragile banking system and the free fall of the state-controlled oil industry, the country’s main source of revenue.

Oil-exporting countries rarely face hard currency shortages, but the Chávez regime may be the exception. Mismanagement and lack of investment have decreased oil production. Meanwhile oil revenue is compromised partly because of Chávez’s decision to supply Venezuelans with the country’s most valuable resource at heavily subsidized prices. Thus a large and growing share of locally produced oil is sold domestically at the lowest prices in the world (in Venezuela it costs 25 cents to fill the tank of a mid-sized car).

A bleak future for Venezuela probably means a bleak future for Cuba, bleaker than the one it already confronts. Business with Venezuela consists of 40 percent of all Cuban trade, and Cuba receives 60 percent of its energy needs on preferential terms from Venezuela. Juan Carlos Hidalgo of the CATO Institute may not be exaggerating when he says that the Cuban economy “would probably implode” without the massive Venezuelan oil subsidy.

Will that subsidy and other perks persist after Chavez? Perhaps in the short term. Hidalgo believes that Chavez’s pro-Cuba vice president will prevail in the snap presidential election. Moreover, as a guest blogger at the Christian Science Monitor observes, Havana supplies Venezuela with “a steady stream of 30,000-50,000 Cuban technical personnel working as physicians, teachers, and other instructors, many in impoverished areas that depend upon the social services and training they provide.”

In the intermediate term, however, don’t expect an essentially bankrupt Venezuela to prop up Cuba in exchange for taking skilled workers who can’t find jobs in Cuba off of Castro’s hands. The future of Venezuela’s domestic policy is in considerable doubt, but the future of its relations with Cuba is not. In all likelihood the special relationship will be replaced by a much more normal one. And that could throw the future of Cuba’s domestic policy into doubt.